Hot Topics:

Editorial: What Washington gets wrong about measuring poverty

Carlsbad Current-Argus

Posted:
02/20/2014 06:59:42 AM MST

Washington lawmakers have spent trillions of dollars fighting poverty based on a four-decade old measure that most economists agree is wrong.

Many national efforts to help lower-income Americans rely on the government's official poverty line, developed in 1965. But that dated statistic includes only people who received cash-based assistance from the federal government and doesn't take into account things like food stamps, tax credits and free school lunches.

"The official measure is pretty much worthless," said Ron Haskins, a senior fellow at the Brookings Institution, a think tank, and former senior adviser on welfare policy for President George W. Bush.

The problematic measure undermines anti-poverty programs by making them look less successful, economists say. It also distorts today's poverty landscape by misconstruing many key statistics. That can lead Congress to spend money on the wrong kinds of programs and advocates to push for the wrong kinds of initiatives.

The fact the official poverty measure has stuck around so long despite its well-known problems shows just how little attention Washington pays to the issue.

But that's starting to change.

In 2011, the U.S. Census Bureau issued new poverty estimates based on a model that fixes some of the official measure's basic shortcomings, such as skipping over non-cash assistance.

According to the government's official poverty measure, 15 percent of Americans, or 47 million people, were in poverty in 2012, the most recent data available. That's not much different than the poverty rate when the government started measuring, which has stayed between 12 and 15 percent since the 1970s.

But by using the new formula, 49.7 million Americans were in poverty in 2012, a higher number than the official measure. In addition, it showed that 12.9 percent of Americans over 65 are in poverty, compared to just 8.4 percent by the official measure, while less children are in poverty than previously thought.

But this new way of measuring poverty isn't perfect. The supplemental measure doesn't take into account benefits from massive government health care programs like Medicaid and Medicare.

And because the supplemental measure is so new, there are no trends to compare it with, which is one reason the official measure is still around.

One theory looks not at what people are receiving from the government but at what they are buying themselves.

The "microwave theory," as it's colloquially known, tallies up everything Americans buy to raise their standard of living, from appliances like dishwashers and microwaves, to electronics like laptops and printers.

The consumption measure is a great idea in theory, but the real truth to measuring poverty is that there's no perfect way to do it, Haskins said.

That's because poverty is multi-faceted, economists say.

David Grusky, the director of the Stanford Center on Poverty and Inequality, suggests we start measuring poverty the way we measure unemployment in America — by a whole host of indicators.

Grusky draws on what he calls the log-factory metaphor: A town downstream of a pollution-prone log factory can employ social workers, doctors and government officials to treat the illnesses and missed productivity and dozens of other social problems caused by pollution. Or it can bypass all that trouble by going directly to the source and regulating the log factory.

The causes of poverty are like the log factory, he argues: They could be nearly eliminated by going to their source.

"There are complicated effects of poverty, but not causes," he said.

Solving poverty requires investment in both education and creating more jobs, both conservative and liberal economists agree.

And Grusky said that is where policymakers fall short: failing to make that investment.

He, among others, theorizes that investment in fighting poverty's causes costs far less than tackling its downstream effects.

"It's just a matter of saying, 'Actually, if we thought seriously about it and really fought a second war on poverty as if we meant it, because we know the costs are so dire, we could do it,'" Grusky said.

But first, policymakers need to agree on how to measure poverty in the first place.